IRS and federal prosecutors have launched a criminal investigation into serial disability access plaintiff Scott Johnson, who has moved his lawsuit operation to the Bay Area in recent months, to determine whether he has paid taxes on his alleged millions of dollars in settlements, multiple sources told this newspaper.

Unless a plaintiff suffered physical injuries as a result of a civil settlement, that individual must pay taxes on the monetary award, tax experts said. It is unclear whether Johnson paid any taxes on any of his Americans with Disabilities Act settlements with thousands of businesses in California that he alleged obstructed his access as a paralyzed customer using a wheelchair. He and his attorney did not return requests for comment.

In December 2015, attorney Catherine Corfee, who often represents small businesses sued by Johnson, said she received an email from a federal prosecutor that there was a criminal grand jury probe into Johnson’s “treatment of settlement proceeds for ADA lawsuits.”

The attorney recounted more than a decade opposing Johnson in court and how he would try to add physical injury wording to the settlements despite not alleging any such damages in the original complaint.

“I have refused to allow the words ’caused injury’ to make sure he pays his taxes,” Corfee said.

“I’m not going to participate in tax fraud,” she said. “Not one of my cases did I ever need to request medical records. If you don’t allege (physical injuries) in the lawsuit, then why settle for it?”

But, she said, other attorneys and defendants may not be as careful when finalizing their settlements.

Attorney Cris Vaughan said an IRS criminal investigator and federal prosecutor have reached out to him recently about Johnson. This newspaper reported earlier this month on Johnson moving his serial litigation operation to the Bay Area, suing dozens of East and South Bay businesses since October.

Vaughan, who frequently litigates against Johnson, said the feds asked about getting copies of certain documents involving the lawsuits and settlements involving Johnson.

Michael Welch has defended hundreds of small business against Johnson and said that two weeks ago an IRS agent for criminal investigations and federal prosecutor asked to talk to him about Johnson. He said Johnson never claimed physical injuries in his complaints.

“If you just drive by the place and sue them, how much of a physical injury can you get?” Welch said.

Johnson is known to sue small businesses citing minor ADA infractions, and based on the law, he can collect thousands of dollars in violations and recoup his own attorney’s fees. He almost always settles for tens of thousands of dollars.

An IRS spokeswoman said she could not comment publicly “at this point in time,” and a U.S. Attorney’s Office representative said she could not confirm or deny any investigation.

UC Berkeley law professors David Gamage and Mark Gergen both agreed that based on his claims, Johnson should be paying taxes on any settlements.

“Anything he receives should be taxable, unless there is something going on than what is listed in the complaint,” Gamage said. “If he’s not paying his taxes, he’s probably involved in tax fraud.”

However, he said such a case would be difficult.

“If the IRS challenges it, the question is was this really a settlement involving a physical injury or something else,” Gamage said. “But it’s really hard for the IRS to find out the economic substance of a settlement. That’s hard to prove.”

Peter Carter said any criminal troubles would be karma for Johnson, who sued the 77-year-old Lafayette resident in January.

Carter owns a light industrial complex in Pacheco, and Johnson targeted one of his tenants — Source Tube & Hose, a one-man operation that makes large hydraulic hoses for tractors, bulldozers and backhoes. Carter said it’s not a retail site, and that the owner constructs these hoses for contractors but gets little to no foot traffic. Businesses that are not public do not have to comply with all ADA requirements.

However, last year, Johnson arrived in his van and asked the owner if he could buy a foot of hydraulic pipe. The owner did him a favor, Carter said, and was rewarded by Johnson suing him for not providing handicap parking, having a counter too high and a noncompliant door handle.

“We’re not dealing with the public. He screwed up when dealing with this property,” Carter said.

Ironically, Carter uses an electric scooter himself to move around because of a genetic back condition, and is acutely aware of access issues.

Matthias Gafni is a Pulitzer Prize winning investigative reporter for the Bay Area News Group. He has reported and edited for Bay Area newspapers since he graduated from UC Davis, covering courts, crime, environment, science, child abuse, education, county and city government, and corruption. A Bay Area native, he loves his Warriors, Giants and 49ers. Send tips to 925-952-5026 or mgafni@bayareanewsgroup.com. Send him an encrypted text on Signal at 408-921-8719.